can't claim exemption or educational credit for my college student child due to high MAGI on my tax return. Trying to see if the child can claim the credit as non dependent to get the educational credit.
First, there are 2 different parts to the educational credit. A refundable part (part 1 of form 8863) and an Nonrefundable part (part 2 of form 8863). Non refundable part basically reduce tax liabilities. Refundable part gives a credit even if owing no more tax liability.
Nonrefundable part qualification is pretty easy but only reduces tax liabilities. If low to no tax liability, this part isn't worth much.
For the refundable part, the non dependent child (18-24) full time college student is required to have earned income greater than half of their "support" to receive the educational credit. support is defined as food, shelter, education, medical, dental etc.
Since my child is attending a private school with ~$50k in tuition and ~$70k total for "support", earned income would need to be about $35k to meet this requirement. Tall order for a full time college student for this refundible part.
Is my understanding correct?
Here is form 8863 directions https://www.irs.gov/pub/irs-pdf/i8863.pdf
Support definition on page 6 right column towards bottom of 8863 directions.
Earned income > half of support requirement on page 6 left column towards bottom ( line 7 instructions ) of 8863 directions
Yes, you understand correctly.
The IRS phases out the education credit by income for the person claiming the student.
The dependent student MAY claim the non-refundable portion, but the dependent student CANNOT receive the refundable portion.
Additionally, the dependent student is not able to claim his/her own exemption (although there is no exemption amount this year) BUT the person that CAN claim the dependent CAN'T either in this case. For the dependent student to take the non-refundable portion of the credit, no one can claim the student.